RPI direction + NS&I

Apr 28, 2015 3 Replies
F

Where is inflation going? Thoughts on this please. I know if we knew the answers to this kind of question, we'd be very rich, but ideas welcome.



Late next month I have a maturing NS&I inflation linked bond. It was RPI +1%. I can renew for 3 or 5 years at RPI+0.05% tax free.



These were a great investment during the crash, but became terrible when inflation dipped towards zero.



I expect more inflation if labour win. ~3% for 5 years is available from some of the smaller banks, but taxable unless I use my ISA allowance. I already intend to make my max SIPP contribution from other funds.



As these RPI+ x funds are no longer available from NS&I for new investors, it may be worth keeping some.



I'm thinking maybe keep half for 3 years, and half into an ISA UK bond fund.



Tough choices. TIA.



fred


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R

One thing to think about is what happens if inflation becomes negative. The NSI bonds use 0 or RPI whichever is larger (IIRC).

The fact that you can no longer buy them, but only maintain the ones you have, suggests that they are a good thing.

Robert

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F

Thanks. Pretty much my thoughts too - but ~3% fixed for 5 years is available. NS&I were quick to drop from RPI+1 down to RPI, but don't seem to want to increase now inflation is near zero.

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R

I guess that tells us that the government expects inflation to rise significantly above 3% during the next 5 years.

Robert

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